Demand Media, the company behind eHow.com, is looking to go public this week. They plan to trade on the New York Stock Exchange under the ticker symbol “DMD,” but there could be trouble for the companies business.
Just as Demand Media is launching their IPO, Google is cracking down on search engine spam. Demand Media’s business revolves around creating content to rank in the search engines. In a securities filing related to their IPO, Demand says, “while traditional media companies create content based on anticipated consumer interest, we create content that responds to actual consumer demand.”
This means they find hot keywords, things people are searching for, and then hire people to build content around those keywords. This is somewhat similar to the way the average blogger works, except that most bloggers have a topic they stick to and they don’t have a team of contractors to churn out content.
Some of these articles are filled with useful information, but others are closer to what Marco Arment described when he railed against content “generated by penny-hungry affiliate marketers and sleazy web ‘content’ startups to target long-tail Google queries en masse, scraping content from others or paying low-wage workers to churn out formulaic, minimally nutritious pages to answer them.” Demand isn’t the only “content farm,” of course. Associated Content, which was bought by Yahoo for $100 million last year, also produces tens of thousands of articles a month on similar kinds of topics, and there are several smaller sites such as Suite101.com that take a similar approach. via GigaOm
It will be interesting to see if Google’s attack on search engine spam will affect Demand Media and companies like it, but the mere threat of losing search rankings could affect their business. Matt Cutts writes:
As “pure webspam” has decreased over time, attention has shifted instead to “content farms,” which are sites with shallow or low-quality content. In 2010, we launched two major algorithmic changes focused on low-quality sites. Nonetheless, we hear the feedback from the web loud and clear: people are asking for even stronger action on content farms and sites that consist primarily of spammy or low-quality content.
Demand Media has seen narrow profits with their approach, losing $31 million in the first 9 months of 2010. The previous year, however, revenue jumped from $143 million to $179 million. Proceeds from the IPO would be used to expand abroad and fill out their content library. After expenses, Demand expects to see net proceeds of $58 million.
via Official Google Blog, Bloomberg